House File 2331 - Introduced HOUSE FILE 2331 BY COMMITTEE ON STATE GOVERNMENT (SUCCESSOR TO HSB 583) A BILL FOR An Act concerning investment of certain public funds in and 1 public contracts with companies that boycott Israel. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 5462HV (2) 86 ec/sc
H.F. 2331 Section 1. NEW SECTION . 12J.1 Legislative findings and 1 intent. 2 The general assembly is deeply concerned and does not 3 support boycotts and related tactics that have become a tool 4 of economic warfare that threaten the sovereignty and security 5 of allies and trade partners of the United States, including 6 the state of Israel. Therefore, the general assembly intends 7 that state funds and funds administered by the state, including 8 public employee retirement funds, should not be invested in, 9 and public contracts should not be entered into with, companies 10 that refuse to engage in commerce with Israel and boycott 11 Israel or persons doing business in Israel or territories 12 controlled by Israel. 13 Sec. 2. NEW SECTION . 12J.2 Definitions. 14 As used in this chapter, unless the context otherwise 15 requires: 16 1. “Company” means any business or business entity that is 17 publicly traded and that is not based in the United States. 18 2. “Direct holdings” in a company means all publicly traded 19 securities of that company that are held directly by the public 20 fund in an actively managed account or fund in which the public 21 fund owns all shares or interests. 22 3. “Indirect holdings” in a company means all securities 23 of that company that are held in an account or fund managed 24 by one or more persons not employed by the public fund, in 25 which the public fund owns shares or interests together with 26 other investors not subject to the provisions of this chapter. 27 Indirect holdings include but are not limited to mutual funds, 28 fund of funds, index funds, private equity funds, hedge funds, 29 and real estate funds. 30 4. “Public entity” means the state, political subdivisions 31 of the state, public school corporations, and all public 32 officers, boards, commissions, departments, agencies, and 33 authorities empowered by law to enter into public contracts for 34 the expenditure of public funds, including the state board of 35 -1- LSB 5462HV (2) 86 ec/sc 1/ 7
H.F. 2331 regents and institutions under the control of the state board 1 of regents. 2 5. “Public fund” means the treasurer of state, the state 3 board of regents, the public safety peace officers’ retirement 4 system created in chapter 97A, the Iowa public employees’ 5 retirement system created in chapter 97B, the statewide fire 6 and police retirement system created in chapter 411, or the 7 judicial retirement system created in chapter 602. 8 6. “Scrutinized company” means any company that publicly 9 states it is participating in a boycott of Israel. 10 Sec. 3. NEW SECTION . 12J.3 Identification of companies —— 11 notice. 12 1. a. By March 1, 2017, the public fund shall make its 13 best efforts to identify or have identified all scrutinized 14 companies in which the public fund has direct or indirect 15 holdings or could possibly have such holdings in the future and 16 shall create and make available to the public a scrutinized 17 companies list for that public fund. The public fund shall 18 review on an annual basis and update, if necessary, the 19 scrutinized companies list. 20 b. In making its best efforts to identify or have 21 identified scrutinized companies, the public fund may review 22 and rely, in the best judgment of the public fund, on publicly 23 available information regarding companies, and including other 24 information that may be provided by nonprofit organizations, 25 research firms, international organizations, and government 26 entities. The public fund may also contact asset managers 27 and institutional investors for the public fund to identify 28 scrutinized companies based upon industry-recognized lists of 29 such companies that the public fund may have indirect holdings 30 in. 31 c. The Iowa public employees’ retirement system, acting 32 on behalf of the system and other public funds subject to 33 this section, may develop and issue a request for proposals 34 for third-party services to complete the identification of 35 -2- LSB 5462HV (2) 86 ec/sc 2/ 7
H.F. 2331 scrutinized companies and the compilation of a scrutinized 1 companies list. The Iowa public employees’ retirement system 2 shall consult with all other public funds on the development of 3 the request for proposals. However, selection of a successful 4 proposal and the final scope of services to be provided shall 5 be determined only by those public funds that have agreed to 6 utilize the third-party services. If more than one public fund 7 decides to utilize the third-party services, the participating 8 public funds shall equally share the costs of such services. 9 2. a. For each company on the scrutinized companies list, 10 the public fund shall send or have sent a written notice 11 informing the company of its status as a scrutinized company 12 and that it may become subject to divestment and restrictions 13 on investment in the company by the public fund. The notice 14 shall offer the company the opportunity to clarify its 15 activities or to cease its activities causing its inclusion 16 on the scrutinized company list. The public fund or its 17 representative shall continue to provide such written notice on 18 an annual basis if the company remains a scrutinized company. 19 b. If, following notice as provided by this section, a 20 scrutinized company ceases activity that designates it as 21 a scrutinized company and submits a written statement to 22 the public fund that it has ceased engaging in activities 23 boycotting Israel, the company shall be removed from the 24 scrutinized companies list. 25 Sec. 4. NEW SECTION . 12J.4 Prohibited investments —— 26 divestment. 27 1. The public fund shall not acquire publicly traded 28 securities of a company on the public fund’s most recent 29 scrutinized companies list so long as such company remains on 30 the public fund’s scrutinized companies list as provided in 31 this chapter. 32 2. a. The public fund shall sell, redeem, divest, or 33 withdraw all publicly traded securities of a company on the 34 public fund’s list of scrutinized companies, so long as the 35 -3- LSB 5462HV (2) 86 ec/sc 3/ 7
H.F. 2331 company remains on that list, within eighteen months following 1 the first written notice sent to the scrutinized company as 2 required by section 12J.3. 3 b. This subsection shall not be construed to require the 4 premature or otherwise imprudent sale, redemption, divestment, 5 or withdrawal of an investment, but such sale, redemption, 6 divestment, or withdrawal shall be completed as provided by 7 this subsection. 8 3. The requirements of this section shall not apply to 9 indirect holdings of a scrutinized company. The public 10 fund shall, however, submit letters to the managers of such 11 investment funds containing scrutinized companies requesting 12 that they consider removing such companies from the fund 13 or create a similar fund with indirect holdings devoid of 14 such companies. If the manager creates a similar fund with 15 indirect holdings devoid of such companies, the public fund 16 is encouraged to replace all applicable investments with 17 investments in the similar fund consistent with prudent 18 investing standards. 19 Sec. 5. NEW SECTION . 12J.5 Reports. 20 1. Scrutinized companies list. Each public fund shall, 21 within thirty days after the scrutinized companies list is 22 created or updated as required by section 12J.3, make the list 23 available to the public. 24 2. Annual report. On October 1, 2017, and each October 25 1 thereafter, each public fund shall make available to the 26 public, and file with the general assembly, an annual report 27 covering the prior fiscal year that includes the following: 28 a. The scrutinized companies list as of the end of the 29 fiscal year. 30 b. A summary of all written notices sent as required by 31 section 12J.3 during the fiscal year. 32 c. All investments sold, redeemed, divested, or withdrawn as 33 provided in section 12J.4 during the fiscal year. 34 Sec. 6. NEW SECTION . 12J.6 Public entities —— contract 35 -4- LSB 5462HV (2) 86 ec/sc 4/ 7
H.F. 2331 requirements. 1 A public entity shall not enter into a contract of one 2 thousand dollars or more with a company to acquire or dispose 3 of services, supplies, information technology, or construction 4 unless the contract includes a written statement that the 5 company is not a scrutinized company and will not be a 6 scrutinized company for the duration of the contract. 7 Sec. 7. NEW SECTION . 12J.7 Legal obligations —— immunity. 8 With respect to actions taken in compliance with this 9 chapter, including all good-faith determinations regarding 10 companies as required by this chapter, the public fund shall 11 be immune from any liability and exempt from any conflicting 12 statutory or common law obligations, including any such 13 obligations in respect to choice of asset managers, investment 14 funds, or investments for the public fund’s securities 15 portfolios. 16 EXPLANATION 17 The inclusion of this explanation does not constitute agreement with 18 the explanation’s substance by the members of the general assembly. 19 This bill creates new Code chapter 12J, which restricts the 20 treasurer of state, the state board of regents, the Iowa public 21 employees’ retirement system (IPERS), the public safety peace 22 officers’ retirement system, the statewide fire and police 23 retirement system, and the judicial retirement system, defined 24 as “public funds”, from directly investing in certain companies 25 engaged in a boycott of Israel. The bill also requires all 26 public entities, including the state and political subdivisions 27 of the state, entering into contract with a company of $1,000 28 or more to include a written statement in the contract that the 29 company will not engage in a boycott of Israel for the duration 30 of the contract. 31 Concerning public funds, the bill requires each public 32 fund to develop and maintain a list of scrutinized companies 33 that the fund has direct or indirect holdings in or in which 34 the fund may invest in the future. Each public fund shall 35 -5- LSB 5462HV (2) 86 ec/sc 5/ 7
H.F. 2331 determine this list by March 1, 2017, and update it on an 1 annual basis. The bill defines “scrutinized companies” as 2 those companies that publicly state they are participating 3 in a boycott of Israel. The bill defines a “company” as any 4 business that is publicly traded and not based in the United 5 States. Once a company is listed on the scrutinized companies 6 list of a public fund, the bill requires the public fund to 7 send a notice to that company relative to the requirements of 8 the bill, to include notice that the company may qualify for 9 divestment and other investment restrictions by the public 10 fund. 11 New Code section 12J.4 requires that a public fund not invest 12 in, and shall divest from, holdings in a scrutinized company. 13 If the public fund has direct holdings in the company, the 14 public fund shall proceed to divest all assets with that 15 company in 18 months so long as the company continues active 16 business operations in Israel. The bill provides that a public 17 fund shall not be required to divest or refrain from investing 18 in a company if the public fund has indirect holdings, and not 19 direct holdings, in that company. However, public funds are 20 encouraged to move their indirect holdings to funds that do 21 not include scrutinized companies. The bill defines indirect 22 holdings to include shares in an account or fund managed by 23 persons not employed by the public fund, including mutual 24 funds, private equity funds, and other similar funds. 25 The bill further requires each public fund to prepare 26 and make available to the public, and file with the general 27 assembly, an annual report, beginning October 1, 2017, 28 concerning actions taken by the public fund relative to the 29 requirements of new Code chapter 12J in the previous fiscal 30 year. 31 The bill further provides that with respect to actions 32 taken in compliance with this bill, including all good-faith 33 determinations regarding companies as required, the public 34 fund shall be immune from any liability and exempt from any 35 -6- LSB 5462HV (2) 86 ec/sc 6/ 7
H.F. 2331 conflicting statutory or common law obligations, including 1 any such obligations in respect to choice of asset managers, 2 investment funds, or investments for the public fund. 3 -7- LSB 5462HV (2) 86 ec/sc 7/ 7